Sydney - Affordable & Liveable Property Guide 2nd Half 2018

Affordable Suburbs - Sydney

Between 2017 and 2018, Sydney Metro median house prices have
softened by -5.6%, whilst units have softened by -2.5%. Affordable options can
be found in Sydney’s South Western suburbs.

A key finding in the Sydney
Affordable and Liveable Property Guide 2nd Half 2018 is that all
affordable and liveable suburbs identified have declining annual median house
or unit price growth. Thus, instead of showcasing suburbs with the highest
price growth, which has been the trend over the past 4-5years, for the first
time, it became an exercise in minimising the decline in capital growth. That
said, this is great news for first home buyers, as this means more suburbs
within 20kms are becoming affordable.

The number of first home buyers in New South Wales increased by 68.8% over the past 12 months to the June 2018 quarter, which is only a slight decline from the 74.9% growth over the past 12 months to December 2017 quarter3. This confirms that there is a continuing return towards a sustainable market. Table 2 provides the percentage of suburbs that is available for house buyers. Liveable Suburbs
- Sydney

In the 12 months, between the 2nd half of 2017
and the 2nd half of 2018, there has been some important shifts in
price brackets for houses in Sydney. For the first time in 5 years, the lowest
bracket of houses below $500,000 have emerged. These have been very low in
activity, with only a handful of sales recorded in these instances. Across the
entire price range, affordability has increased as the Sydney market has
softened to a more sustainable level. Access to suburbs priced between $500,000
to $800,000 have more than doubled to 3.7%. Access to the $800,000 to $1,000,00
bracket have also increased, as did the still dominant $1,000,000 to $2,000,000
price bracket. All these gains have shifted from the upper price range of
$2,000,000+, which reduced by -8.0% in the past 12 months, down to 25.6%. This
cooling is positive news for all future property buyers, with a return to
sustainable pricing expected to help better manage growth levels in the future.

Highly affordable suburbs, those with a maximum house price
of the average state loan plus a 135% deposit exist. 74 suburbs are within this
price bracket, significantly more than the 8 identified in the 1st
half report. This reinforces that the market is moving into a more affordable
position for buyers.

Despite this, many of the Sydney suburbs fail to meet the
liveability criteria set. 160% (houses) and 60% (units) premiums needed to be
added to the New South Wales average state loan, which is extremely close to
the 163% (houses) and 58% (unitss) premiums that needed to be added to purchase
Sydney Metro median price. This suggests that those looking for basic
liveability aspects must be willing to pay extreme premiums, making the cost of
liveability quite high in Sydney.

Despite being identified as affordable and liveable suburbs
in the 1st half of 2018, Milperra (houses), Dee Why (units) and
North Rocks (units) all failed to meet the liveability criteria in the 2nd
half of 2018, making them ineligible as affordable and liveable suburbs this
half. There is a need for strategic action to improve liveability in Sydney.

Affordable & Liveable Suburbs - Sydney

Sydney’s rental market has experienced a softening in
quarterly price growth since Q1 2018, decreasing by -3.8% to $500 for 3-bedroom
houses and by -1.8% to $550 for 2-bedroom units. That said, over the past 12
months to Q2 2018 median weekly rents increased by 3.1% for 3-bedroom houses
and remained stable for 2-bedroom units. The rising vacancy rate of 2.7% as of
June 2018, and the increasing supply of unit stock, is placing downward
pressure on the rental market. Investors are urged to hold onto their assets,
lock in prices, and secure longer tenancies. Future investors are urged to buy
into more affordable suburbs to minimise risks.

In the 2nd half of 2018, Sydney will see
approximately $15.3B in future project developments commence. The focus is on
infrastructure, which is critical to attract population growth and commercial
activity for continued economic productivity. Major projects during this period
are the $5.0B Westconnex M4-M5 link, the $1.0B Parramatta Light Rail network,
and the $955.0M Sydney Central Station and Central Walk works. This presents
many opportunities for astute investors to capitalise on untapped property
price growth potential in nearby suburbs.

Methodology

This PRDnationwide Affordable
and Liveable Property Guide 2nd Half 2018 analyses all suburbs
within the Greater Sydney area in a 20km radius from the CBD. In doing so the
below factors and methodology were considered:

Property trends – all suburbs considered will have a minimum
of 20 transactions for statistical reliability purposes, with positive price
growth from 2017 to 2018.

Investment – as of June 2018 the suburb will have an
on-par or higher rental yield than Sydney Metro, and an on-par or lower vacancy
rate.

Affordability – suburbs with a median price below the maximum
sale price of state average home loan plus allocated premium percentage. In
this report 160% (houses) and 60% (units) was added to the average New South
Wales home loan, which was $484,829 as at June 2018. This is below the 163%
(houses) and 58% (units) premiums needed to purchase the Sydney Metro median
price, thus more affordable for buyers.

Project development – the suburb has a high total estimated
value of project development for the 2nd half of 2018. This ensures
sustainable economic growth, having a positive effect on the property market.

Liveability factors – this includes
ensuring low crime rate, availability of amenities within a 5km radius (i.e.
schools, green space, public transport, shopping centers, and health care
facilities), and an unemployment rate on par or lower in comparison to the
state average (as determined by the Department of Jobs and Small Business, June
Quarter 2018 release).